When is VAT registration required? 

You must register your business for VAT when its taxable turnover exceeds the threshold set by the government, currently set at £85,000 for 2023.

This mandatory registration will enable you to collect VAT from your customers, submit VAT returns and claim back VAT on purchases where appropriate. However, some businesses can voluntarily register for VAT before their turnover reaches the threshold, for various reasons, to make them look more professional for example. 

Why should you register for VAT? 

 Registering for VAT is not only mandatory once you’ve reached the threshold, but it allows you to charge and collect VAT from your customers and reclaim VAT on your purchases.  

When does VAT registration become compulsory? 

VAT registration becomes compulsory when your business’ taxable turnover exceeds the VAT registration threshold, in any 12-month period (rolling basis) or where the business believes it will exceed the threshold in the next 30 days.  

The VAT threshold 2023  

For the 2023/2024 tax year, the VAT registration threshold is £85,000. The amount is calculated on a rolling basis, which means businesses must monitor their taxable turnover for a consecutive 12-month period. If at any point your total taxable turnover has exceeded £85,000 within the last 12 months, you must get VAT registered. 

Exceeding the VAT threshold in the next 30 days alone 

If you expect that your business’ taxable turnover will surpass the VAT threshold within the next 30 days, it becomes mandatory that you get VAT registered. It’s important to keep this in mind if your business is currently experiencing rapid growth or anticipating a significant increase in sales. 

Exceeding the VAT threshold in the past 12 months 

If your overall taxable turnover surpasses the VAT threshold of £85,000 within the past 12 months, you must apply for VAT registration within 30 days of the month you exceeded the threshold. The date when your registration must come into effect will be the first day of the second month following your business surpassing the threshold.  

Non-UK established businesses 

The VAT registration threshold of £85,000 doesn’t apply to businesses established outside the UK.  

Can you voluntarily register for VAT? 

 Businesses can voluntarily get VAT registered even though the taxable turnover hasn’t reached the threshold.  

Choosing a VAT Scheme after registration 

  During the VAT registration process, you can choose a VAT scheme that best suits your needs and circumstances: 

VAT flat rate scheme 

Only businesses with a taxable turnover of less than £150,000 are eligible for this scheme. It allows businesses to pay a fixed proportion of their turnover as VAT, making record-keeping much simpler. However, businesses cannot reclaim VAT on purchases except for certain capital assets over £2,000. 

VAT cash accounting scheme 

Popular with small businesses and start-ups with a turnover of under £1.35m, this scheme enables businesses to pay VAT once they’ve received payment from customers. You can also only reclaim VAT on purchases you make once you’ve paid the supplier. 

Annual accounting scheme 

You make advance VAT payments that are based on your estimated annual liability. This means that rather than filing a quarterly return, you can submit one annual return and make advance payments throughout the year based on your previous year’s return. 

When do you no longer need to be VAT registered? 

 You no longer need to be VAT registered if your taxable turnover drops below £83,000.  That threshold is based on the same rolling/consecutive 12-month basis as used for VAT registration.  

Get in touch 

To help your business navigate through the complexities of VAT and ensure it remains compliant in line with legislative changes, it’s important to firstly understand VAT and whether VAT registration is required. You also need to assess the benefits of registering and when VAT should be paid to avoid unnecessary penalties. If you would like to find out more about our range of VAT services and discuss your specific business VAT requirements, contact our VAT experts today. 

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